Tourism, retail lose out as virus keeps spreading

Industry

Published: 02 Jun. 2015, 20:59

Tourism, retail lose out as virus keeps spreading

Surgical masks stacked up at a major discount store in Seoul on Tuesday as news that two people infected with the disease died and the number of people being infected grows. Hand sanitizer sales are rising as well. [NEWSIS]

After spreading to 25 patients and killing two, Middle East respiratory syndrome (MERS) is infecting Korean businesses, particularly in tourism and retail as Chinese travelers, the biggest tourism group by nationality, start canceling Korean vacations.

Shares of tourism and cosmetics companies plummeted Tuesday as well as other companies and industries dependent on inbound travelers.

According to Hana Tour, 300 Chinese tourists scheduled to arrive in Korea Thursday canceled. “I also heard that many Chinese tourists with other travel agencies have canceled their bookings,” said a spokesman of Hana Tour.

The tourism industry particularly worries that MERS might deflect Chinese tourists to Japan, where the weak yen has made visits cheaper than they used to be. According to industry data, Japan has been attracting more Chinese tourists than Korea since November.

“We are carefully monitoring the situation because MERS is in a beginning stage,” said another tour agency spokesman. “But the situation will get much worse if the Chinese government prohibits its citizens traveling to Korea. If that happens, duty-free shops and department stores that were crowded with Chinese tourists might lose out big.”

“It is true that some cancellations have been reported,” said Park Young-gyu, a spokesman for the Korea Tourism Organization, which has set up a task force to analyze the impact of the disease. “MERS may influence the local tourism industry, both Koreans going out and foreigners coming in. When SARS spread a decade ago, the number of foreign tourists to Korea shrank nearly 11 percent year-on-year during the peak summer season.”

Tourist agencies are the first to be affected with June reservations being canceled.

“Nearly 30 percent of Chinese tourists who reserved tours to start by June 12 have canceled their reservation due to MERS,” said a spokeswoman from Modetour International. “Most of the cancellations are coming from mainland China rather than Hong Kong or Singapore.”

The entire summer season is at risk if MERS spreads further. The numbers of Chinese tourists shrank during the SARS crisis in Asia in 2003 and after the Japanese earthquake and nuclear plant explosion in 2011.

“We’re worried about potential cancellations for July and August, as many who booked for that time are calling us,” she added. “Now is the beginning of the peak season. Chinese tourists come more in the summer months than in the winter.”

The nation’s two flag carriers, Korean Air and Asiana Airlines, have seen hundreds of incoming reservations canceled in the last two days.

“There were only individual passengers canceling tickets on Monday, but groups that booked tickets started making phone calls to ask whether Korea is safe,” said a spokesman of Asiana Airlines.

Lotte Department Store said the number of Chinese tourists hasn’t diminished much but it is defensively strengthening the sanitation conditions at stores. The worry is even bigger at local plastic surgery clinics and dermatology hospitals. They worry that tourists might not come for procedures since MERS is spread through hospitals in Korea.

Sales of facial masks and hand washes have been increasing rapidly. According to Lotte Mart, the sale of masks between May 20 and June 1 increased by 259.8 percent from a year earlier and by 67.2 percent from a week before. Sale of hand sanitizer also increased 33.4 percent from a week earlier.

Shares of companies in the tourism and cosmetics businesses fell. AmorePacific, the country’s largest beauty company with a huge following among Chinese consumers, saw its shares fall by 4.52 percent from the previous session to close at 370,000 won.

Tourists from Asian countries buy cosmetics in bulk at Korea’s duty free-shops. China accounts for the largest group of tourists to Korea by nationality.

Shares of LG Household and Health Care dropped by 6.29 percent to 51,000 won ($45.78). Lotte Tour Development plummeted by 4.48 percent to 16,000 won, while shares of Hotel Shilla also declined by 3.8 percent. GKL, which operates casino businesses, also fell by 4.92 percent.

“People will not like visiting crowded places,” said Yang Il-woo, a researcher at Samsung Investment and Securities. “It would damage companies’ short-term earnings.”

Manufacturing businesses are fearing MERS as well. One production line worker at a Ssangyong Motor plant in Pyeongtaek, Gyeonggi, was confirmed infected with the disease. The company sent 20 co-workers of the 46-year-old patient home. “We conclude that he was infected while taking care of his father [in a hospital],” said a spokesman of Ssangyong. “The father was fortunately not infected. We also let his co-workers be examined at local hospitals just in case.”

Companies with businesses in the Middle East including construction companies are dealing with tons of phone calls from workers’ family members who want to know whether their breadwinners are fine.

“We have told employees to wash their hands frequently and not to touch animals including camels,” said a spokesman of a construction company.

BY KWON SANG-SOO, PARK EUN-JEE AND KIM JI-YOON [kwon.sangsoo@joongang.co.kr]